Parkin Son

Archive for November, 2009

The general rule is that an officer cannot be held personally liable with the corporation if he acted within the scope of his authority and in good faith for the corporation. In such cases, the officer’s acts are properly attributed to the corporation. However, if it is proven that the officer has used the corporate fiction to defraud a third party, or that he has acted negligently, maliciously or in bad faith, then the corporate veil will be lifted and he will be personally liable for the particular corporate obligation involved.
Life is not always an infinite reservoir of perks for corporate directors and officers. Every breathing moment as a director or officer entails countless perils capable of snuffing out an otherwise fruitful corporate career. A lawsuit against the corporation often includes directors and officers as defendants. A director may be made responsible for the actions of the board, unless he specifically votes against the course of action taken by the board. Promptly objecting to board action and putting this objection on the record could help stave off liability charges against a director. If you have to serve as a director or officer in a corporation, some experts suggest that to protect yourself and your personal assets, you should negotiate for an indemnification contract so that the corporation may be compelled to compensate or reimburse you in case you are forced to turn over some of your assets as a result of a lawsuit against the corporation. Furthermore, you may request that the corporation provide you with liability insurance before you sit as director or officer.
Basking in the glow of a business title carries manifold risks. The higher you go up the corporate ladder, the louder the thud once you fall. Stockholders seem insulated from personal liability because as a rule, they cannot be sued for acts of the corporation. But if a stockholder is extensively involved in running the affairs of the corporation to a point where he exerts effective control of the corporation, he will be held personally liable and creditors could reach his personal assets. This is true even in homeowner’s associations or charitable organizations. If you have a business title in an association where you have minimum contacts, you may yet have your full share of massive liability exposure. Take the case of a California woman who was raped and robbed in her condominium late one evening. She sued the condominium association and won her lawsuit against the homeowner’s association and the individual board members.